Brokers and clients disadvantaged by clients navigating the ‘minefield’ of credit reporting alone
Brokers who don’t have contact with a reputable credit rating repairer to refer bad credit clients to, may be missing out on valuable commission through lost deals, and in some cases may also be doing their clients a disservice, says a leading credit rating repairer and advocate for credit reporting accuracy.
CEO of MyCRA Credit Rating Repairs, Graham Doessel says whilst many people whose credit history shows up with defaults have obtained that default justly, there are also many whose credit file contains errors and omissions and he says those people should be given the chance to clear their name.
“I would like to say it is as easy as calling the Creditor to sort out the mix-up, but in reality clearing bad credit is a minefield, and a credit rating repairer can be invaluable,” Mr Doessel says.
Generally when a client presents to a broker with bad credit they have two options:
(1) Send them packing to resolve the mix-up or to wait until the credit listing “falls off” their credit file in 5 or 7 years before they apply again.
(2) Organise a non-conforming loan at a higher interest rate to absorb the risk associated with lending to those with bad credit.
When faced with a credit rating error, Mr Doessel says the clients who are sent away may not always be able to resolve their credit reporting dispute themselves.
“Credit reporting is governed by mountains of legislation across different industries, so it is not always about right or wrong, but how the letter of the law applies in each case. We have seen many clients who are defaulted despite doing the right thing and despite working actively to try and resolve the situation themselves,” he says.
He says many brokers put credit repair in the “too hard” basket and prefer to steer their clients to the non-conforming market – at least for the first few years of the loan when they can then refinance.
“There are a couple of reasons why a non-conforming loan will not always be the best choice for the client. Firstly, they can lose thousands on interest even over the first three years, and secondly with the market the way it’s been more home owners are stuck, finding they can’t refinance due to lack of equity in the home,” he explains.
Mr Doessel wants to help educate brokers and consumers alike on some of the myths surrounding credit files:
1. Consumers always know they have bad credit before they apply for a loan.
There can be many reasons for people not to know they have bad credit until they apply for a loan. They may have moved, been hospitalised, been an identity theft victim or even been a victim of error with their creditor. If the client was not notified prior to the default, in many instances the listing has been placed on the credit file unlawfully, and should be disputed.
2. Credit file listings are always correctly placed on credit files.
Credit reporting mistakes can and do happen –but most consumers are unable to recognise credit file errors. Some estimates point to as many as 34% of credit files containing errors or omissions.